I will profess a little surprise that the housing stock (which I take to mean available homes=existing plus newly build) % to be as low as it was. I conclude, perhaps erroneously, that the percentage of new housing to existing housing--though great in absolute numbers--is small in relative percentage. Nevertheless, the increase in homeownership is impressive.
"Most recently (mid 1990s to mid-2000s), technology has played an important role in stimulating these changes in the mortgage market by improving the ability of lenders to gather and process information. Consumers now appear to face lower costs for obtaining mortgages, refinancing existing mortgages, and extracting home equity; a better ability of mortgage issuers to measure and price the risk of mortgage applicants; and a greater array of mortgageinstruments from which consumers can choose."
The slope of this curve is astounding."As the down payment constraint is eased, housing consumption increases monotonically. Moving from a down payment rate of 20 percent to 10 percent results in a 24 percent increase in the quantity of housing purchased. As can be observed on the left-hand scale of Figure 5a, this increase in housing consumption also accompanies an increase in total lifetime utility. Not surprisingly, the easing of constraints makes households happier. However, the increase in housing consumption comes at the expense of non-housing consumption."Finally, here's the table that reflects the relationship of housing expenditures on consumption.
I found this clause in the GS S-3 registration
What is says to me (and I'm not lawyer nor do I play one on TV) is that in
the event of a bankruptcy (think New Century), that the
loans might end up the property of the issuing entity. What does this mean?
I think that it means that these loans could be grabbed by the creditors
of the sponsor (such as New Century)and the certificate holders will be left
high and dry.
Let's watch the news for these items. I cannot stress how critical this clause
is--and I'm not sure how remote a probability such action could/would be.
Here's an interesting conflict of interest. You have Morgan Stanley (or any
other mortgage banker) who has securitized these notes and they are
left holding the bag for warehouse loans. How do you think THEY would want
a bankruptcy judge to rule? I think that they would want the judge to rule
these loans as assets of the depositor (e. g. New Century) so they can get their
loans paid from the proceeds of the loans. Very strange circumstances, you think?
Bankruptcy of the Depositor or the The depositor and the sponsor may be
Sponsor May Delay or Reduce eligible to become a debtor under the
Collections on Loans United States Bankruptcy Code. If the
depositor or the sponsor for the
certificates were to become a debtor
under the United States Bankruptcy Code,
the bankruptcy court could be asked to
determine whether the mortgage loans
constitute property of the debtor, or
whether they constitute property of the
issuing entity. If the bankruptcy court
were to determine that the mortgage
loans constitute property of the estate
of the debtor, there could be delays in
payments to certificateholders of
collections on the mortgage loans and/or
reductions in the amount of the payments
paid to certificateholders. The mortgage
loans would not constitute property of
the estate of the depositor or of the
sponsor if the transfer of the mortgage
loans from the sponsor to the depositor
and from the depositor to the issuing
entity are treated as true sales, rather
than pledges, of the mortgage loans.
The transactions contemplated by this
prospectus supplement and the related
prospectus will be structured so that,
if there were to be a bankruptcy
proceeding with respect to the sponsor
or the depositor, the transfers
described above should be treated as
true sales, and not as pledges. The
mortgage loans should accordingly be
treated as
S-22
property of the related issuing entity |
| "NEW YORK (Reuters) - Steelcase Inc. (SCS), the world's biggest office furniture maker, said on Thursday quarterly earnings tripled, helped by growth in its international business. |
| Fourth-quarter net income rose to $29.3 million, or 20 cents a share, from $9.3 million, or 6 cents a share, a year ago. |
| Revenue rose 5.4 percent to $779 million. |
| The Grand Rapids, Michigan-based company said it expects first-quarter earnings of 15 cents to 20 cents per share including special items. |
| The company sees first-quarter revenue up 6 percent to 10 percent." |
"United States Steel Corporation (X) is buying Lone Star Technologies (LSS) for $67.50 per share in cash or total consideration of $2.1 billion, a premium of approximately 39% to Lone Star's closing share price of $48.45 on March 28, 2007."
North American sales are flat for the quarter over quarter, though YOY sales grew about 6%. Herman Miller's sales actually increased 15% over the same period. Clearly North American sales have stagnated
From S-48: The credit score tables appearing in Appendix B show the credit scores, if any, that the originators or underwriters of the Mortgage Loans collected for some mortgagors. Third-party credit reporting organizations provide credit (or FICO) scores as an aid to lenders in evaluating the creditworthiness of mortgagors. Although different credit reporting organizations use different methodologies, higher credit scores indicate greater creditworthiness. Credit scores do not necessarily correspond to the probability of default over the life of the related Mortgage Loan, because they reflect past credit history, rather than an assessment of future payment performance. In addition, the credit scores shown were collected from a variety of sources over a period of weeks or months, and the credit scores do not necessarily reflect the credit scores that would be reported as of the date of this prospectus supplement. Credit scores also only indicate general consumer creditworthiness, and credit scores are not intended to specifically apply to mortgage debt. Therefore, credit scores should not be considered as an accurate predictor of the likelihood of repayment of the related Mortgage Loans."----------------------------
There are many reasons for mortgage originators to finance their activities by issuing mortgage-backed securities. Mortgage-backed securities
I have to believe that overcollateralization deficiency is not a good thing--what I understand (I couldn't find any good information), is that this is part of credit support, and if it is not there, then, those folks at the bottom of the food chain have more risk than they gathered.By Saskia Scholtes andRichard Beales in New York
Published: March 26 2007 03:00 | Last updated: March 26 2007 03:00
Fewer than half of global financial institutions account sufficiently for complex financial and commodity exposures in assessing the riskiness of their holdings, according to a survey by Deloitte.
There are two things that are important.Here's another concept to be aware of and that is "credit support" or enhancement. You can read about it in greater detail here. IF you want your offering to be considered attractive, you need to offer some comfort--some cushion. There's a couple of ways to do that: (1) through structuring subordinated tranches (low on totem pole) as you see in the above diagram, and/or (2) through overcollateralization. Think about overcollateralizaton as a LTV ratio for the securitization (structured debt obligation).Per theLink: "Rating agencies rate the different ‘slices’ (from AAA tounrated) in order to provide market participants and investors with an assessment of the risk associated with each. Performance is largely driven by the collateral manager’s ability to avoid defaults and maintain creditworthiness of the investments." [I do not understand yet how the rating process is effectuated, but I imagine that it is due to FICO, LTV, level of loan documentation and other factors that would provide one with greater comfort of ultimate payback--that's another day. ]
I do not fully understand this diagram with respect to the Overcollateralization Deficit. But there appears to be cross collateralization between A-1 and A-2 notes, and if there is some deficiency, then the note insurer must be increased to maintain the appropriate reserve. I apologize for not having this more fully researched, but I wanted to post some general things first. If I waited until I fully understood all of the ins and outs (which I'm not equipped to do), then this post would never happen. Again, full disclosure of underlying ignorance.Here's another installment of 10-k peak into mortgage lenders.
This peek is for FEDLoans with 40-year terms were 80%, 77%, and 27% of loan originations during 2006, 2005, and 2004, respectively. The increase in loans with 40-year terms is attributable to increased marketing efforts for this product as a response to the decreased "affordability" of houses in our market areas.
Payment Caps. There are varying periods for which our loan payments may be fixed, ranging from one year to five years. If the payment is fixed for one year, after the first year the payment may be increased by no more than 7.5% each year. If the payment is fixed for three years, after the third year the payments for the fourth and fifth years may be increased by no more than 7.5% for each year. If the payment is fixed for five years, after the fifth year, the payment will be adjusted to provide for full amortization, starting with the sixth year. An annual payment cap of 7.5% applies thereafter, subject to the lifetime balance cap described below. Most of our loans, including loans with fixed payment periods of less than or equal to five years, will have payments adjusted ("recast") every five years without regard to the 7.5% limitation to provide for full amortization over the balance of the loan term. The annual payment cap of 7.5% applies thereafter. The portfolio of single family loans with a one-year fixed payment was $4.6 billion at both December 31, 2006 and December 31, 2005 and was $2.9 billion at December 31, 2004. The portfolio of single family loans with three-to-five year fixed payments was $1.8 billion at December 31, 2006, compared to $2.7 billion at December 31, 2005, and $1.6 million at December 31, 2004.
(Click to make larger).
The following table shows the contractual maturities of our loan portfolio at December 31, 2006:
The above is from their press release. Well, it looks like a pretty stellar quarter, but..... I do know that quarterly orders can be lumpy so I smoothed sales and smoothed orders by adding the last 4 quarters and taking an average, then annualizing the average. I then computed the current quarter's percentage to that 4 quarter averaged. You can see on the orders, that is slowing. That is the issue.
On the call they are talking about slowing sales 6-7% per year perhaps getting to 9% with the cultivation of international business. This is about 1/2 of previous growth rates.
empyrean \em-py-REE-uhn; -PEER-ee-\, noun:
1. The highest heaven, in ancient belief usually thought to be a realm of pure fire or light.
2. Heaven; paradise.
3. The heavens; the sky.
adjective:
1. Of or pertaining to the empyrean of ancient belief.
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My former colleagues used to tease me about the words that I use. I was always able to fend off the label of being an utter nerd in that I didn't know about 1/3 of dictionary.com's word of the day. So....here it is in tribute to a market top! It may reach empyrean levels!
I'm making it a point to educate myself in understanding the sub-prime mortgage ticking time bomb. My hypothesis is this: Sub-prime is a symptom of something much larger. It represents a vast ocean of money in search of yield. To meet the demand for yield, a preponderance of structured debt obligations were created. It represents the shifting of risks from the traditional holders to a broader base of holders who may be holding instruments in which all of the opportunity has been wrung out in terms of fees for all of the specialized handlers but none of the risk has been mitigated or perhaps even fairly reflected in the yield.
Okay, you saw it here first. I decided to do some nosing around, and I think that I have done something reasonably credible. I did it on a national basis. I'm pretty confident that you would find much wilder swings. I'm not a statistician, nor do I play on on TV, but I think this supports my point.
